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5 Keys to Managing HOA’s

Since this seems to be the time of year when many homeowner associations are holding their annual meetings I thought I’d post this for both incoming board members as well as homeowners who would like to know the “5 Keys to Managing HOA’s”

I was recently asked to speak to a group of investors about common issues that arise between HOA’s and their homeowners. When preparing for the talk I decided to take the 5  biggest issues or complaints we receive and turn them into tips that association board members could use as they plan for the future.

As you read through these, if you have any questions, feel free to call us at 615-255-2703.

Communication

Managing HOA's CommunicationManaging HOA’s requires communication. There are two primary areas where communication is most important. First is communication between the board and homeowners. The second is communication between the Home Owners Association (HOA) management company and the HOA board.

Almost all of the bellyaching by homeowner association members can be avoided with effective communication. Without it, homeowners will only know what they see and experience; or worse yet, what they hear by word of mouth.  Keeping homeowners updated on what’s going on will squash rumors and help the homeowners see the bigger picture. So often I see Google reviews of companies where members are complaining about cosmetics, yet the HOA is struggling to keep out of bankruptcy due to plumbing or major structural issues.  Taking the time to inform owners will not make everyone happy, but at least they will have a better understanding of the big picture.

Likewise, it is very important for HOA community managers to keep in regular contact with the board. A frequent complaint from board members who hire us is that the previous company that was managing the HOA did not keep the board informed on what was going on. Sometimes, this is a simple oversight on the part of the manager. Unfortunately, it can also be due to the managers not following through with work that was supposed to be done or worse yet, failing to do routine inspections. At Apex Ventures we keep in regular contact with the Homeowner Association Board about the condition of the property, financials, and in many cases, serve as a coach or mentor in order to allow the board to draw on our many years of experience.

 

Educated & Active Board Members

In order for an HOA board to be effective it has to be both informed and active.  Why a board needs to be active versus simply reactive is self-evident. However, an uninformed or uneducated board that is active can be devastating to an HOA. Two of the most dangerous phrases that can be heard in a homeowners association  board meeting are “yeah, but I think…”, and “we’ve always done it this way”. A board needs to be educated on the realities of where they stand currently,  what it will take to meet the demands of the future, and open to the knowledge that comes from experience.

This means they need to examine the financials and budget on a regular basis.  Board members need to ask questions when they don’t understand something. And board members need an experienced HOA management company they can trust to give them accurate information the board can rely on to make good decisions.

For older properties, it can be wise to invest in a reserve study. This independent study looks at all the anticipated needs for the property over the next 40 years, and makes suggestions on how much to budget in order to meet those needs.

When board members have reliable information available to them they can then then create a plan to insure the success of the property.

 

Documentation

A Homeowners Association is a business and every business needs to maintain their documents. Proper record keeping of minutes from board meetings, vendor repairs, accounting and collections are examples of some of the documentation that needs to be preserved and should be expected of anyone managing HOA’s.  Likewise, it is beneficial to keep notes of when you speak to property owners or when they call about a particular issue. Instead of deleting old emails from homeowners, you might want to save them to a “HOA” folder for future use.

Maintaining association documents is a “no brainer”, right? I thought so too, but what happens if you end up with a large HOA management company with lots of turnover? What happens when that management company assigns you a different property manager every few months or if you’re lucky, only once a year? Most companies should have a secure database that houses the documents, and most probably maintain, at least for a while, access to the company email accounts of old employees. However, if the old employee communicated by text or from a personal email account, that documentation could very well be lost forever once they are gone.

Our HOA managers at Apex Ventures tend to stick around a long time. With low turnover, about the only time there is a change is if it makes sense geographically to provide better service.  In those cases, the other manager is still with the company and is available to assist with questions or in locating documents, emails, etc.

 

Follow Up on Repairs

There’s really not much need to explain this one other than to say, “don’t assume the work was done, or that it was done correctly.” Also, if the repair is the responsibility of the homeowner you must be extra vigilant. The failure to properly fix a damaged door frame could lead to water getting into the wall and creating structural damage. That $100 repair that was the responsibility of the owner could easily turn into a $5000 repair that is the responsibility of the association.  Usually, if you have a good HOA community manager, they will be the ones to make sure that repairs are done quickly and correctly.  Ultimately, if you do not trust your property manager, or if the association is self-managed, you will need to follow up yourself.

 

Plan for the Future When Managing HOA’S

“Failing to Plan is Planning to Fail!”

If you are a builder or a community that is less than 5 years old pay close attention to what I’m about to say. You must start saving NOW for repairs that will be needed in 20 years. If you’re really smart, you’ll start planning for the next 40 years.

Are you responsible for your own roads and sidewalks? Are you a condo development with shared sewage? Depending on the size of the development, an extra $10-20 a month per unit now, could very well prevent high assessments and $200/ month association dues in the future.  When you have a sufficient operating budget and a healthy reserve fund, repairs can be addressed quickly before they lead to serious damage.

Apex Ventures, Managing HOA’s for YOU

The Apex Ventures HOA Management team has been providing real estate and property management services in the Nashville area for over 30 years. We are known for managing HOA’s all around the Nashville area, including Franklin and Smyrna. Whether a builder or board member, if you are in need of association managers you can trust, click here or call 615-255-2703 and one of our team members will get back to you with the requested information.

What Investors Need to Know About HOA’s

HOA Police

Investors Need to Know THIS Before Buying a Rental in an HOA

As an investor looking to purchase property in a Homeowner’s Association there are several things you should consider about the Association before purchasing a rental unit:

The Association Governing Documents and Rules and Regulations.

  • Rental RestrictionsThe documents will define any Rental limits that exist and that you will be expected to follow. This is particularly important when purchasing a condominium or townhome.
  • Tenant Requirements
    • Your tenants will not only be required to abide by your rules and regulations in your lease but will also be required to abide by the Rules and Regs of the HOA. Fines will be sent to the owner when a tenants violates any HOA rules.

Other Homeowner Relations

As an investor in an HOA, it’s particularly important for you to blend in with the rest of the Owners. A significant amount of complaints I receive stem from issues with tenants.  Homeowners in an HOA know which units are rental units and they often keep a close eye on those tenants to determine if/when they break the rules.  If you can ensure your tenants abide by the rules then it will make things much easier for you to manage your property.

The Financial Report

  • As an investor your objective is to maximize income and minimize expenses/turnover. To help minimize future unexpected expenses you need to request the following prior to purchasing the unit:
    • Budget
      • This will give you a good picture of the Common areas in the HOA that require annual maintenance and shows where your HOA fees will be spent during that year.
    • Balance Sheet
      • Look for money in a Reserve Account. This would indicate the HOA is saving for future capital expenses which will help you reduce the risk of future unexpected HOA special assessments.
        • Ask manager or selling agent if a Reserve Study has been completed.
      • Income/Expense
        • Every board should receive a financial packet on a monthly basis. Typically, it will show YTD Income/Expenses compared to the YTD budget.  The variance of the two gives some insight into the financial health of the HOA.  For example:
          • Income less than budget indicates some level of delinquency in the HOA.
          • Expenses over budget indicates there were some type of unexpected expenses throughout the year.
          • The combination of lower than expected income with higher than expected expenses will often lead towards a special assessment if the two are not properly corrected.

HOA Minutes

  • The board and owner meetings are subject to having their meetings recorded by written minutes. They should be available to a buyer upon request to the seller or selling agent.
    • Annual meeting minutes
      • These minutes will have good insight onto the major items of concern of the majority of the homeowners as annual meetings often turn into a complaint forum for owners.
    • Board meeting minutes
      • These minutes will offer better perspective on the issues that the board has to resolve on a daily/weekly/monthly basis. They tend to reflect the property specific issues of the HOA.  Typically these meeting minutes are more detailed than the annual meeting minutes.

HOA RulesHOA Boards Are Not the Enemy

Most HOA board members try to make the best decisions they can for the community. Generally speaking, if there is a rule, there is a reason. But going beyond the rules, they are making decisions for your home that may be looking 5, 10, or 30 years out. Keep this in mind when searching for a property.

For a townhome, super-low association fees may not allow for enough reserves to replace the roof in 20- 30 years. However, the cost of roof repair per unit will be much lower in a multi-level condominium. There are too many variables to cover in today’s blog, but the key takeaway here is to know what you’re getting into before investing in an HOA governed community.

Apex Ventures’ HOA Managers Are Here for You

We manage condos, townhomes, single family homes, and duplexes.  Apex Ventures Real Estate and Property Managers are the HOA managers you can trust.  If you have any questions regarding your upcoming purchase, or if you’d like a REALTOR who is familiar with HOA’s to represent you, give our team a call at 615-255-2703 or submit a request at http://apexventuresinc.com/contact-us/.

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